Part 4 of a 4-day series
Rep. Russell Pearce was leaning hard on the Arizona Department of Public Safety over its East Valley towing contract. The words he used to do it were written by a Cactus Towing lobbyist.
The Mesa Republican sent a letter to then-DPS director David Gonzales in March 2005 objecting to the agency’s plan to end the exclusive contract long held by Cactus.
The letterhead and signature were Pearce’s.
The rest of the letter was written by John Mangum, a lobbyist for Cactus.
Mangum sent a draft of the letter to a Cactus executive three days before Pearce signed and forwarded it to Gonzales. The text of the Pearce letter is virtually identical to Mangum’s draft.
Pearce says he has known Cactus’ former owner, Lee Watkins, for more than 20 years. They have become close friends, says Pearce, who has sponsored bills in the last few years that benefited the towing industry in general and Cactus in particular.
After Pearce’s son, Justin, was convicted on a felony charge of tampering with a public record in 2000, Watkins gave him a job as a tow truck driver.
When Pearce ran for office, Watkins and his employees were among his most reliable donors. Since 2004, Pearce has raked in $2,280 from Cactus employees, their spouses and company lobbyists.
That doesn’t sound like much. But many of the donations were at or near the maximum allowed by law for individual contributions. Pearce raised a total of $20,842 from individual donors in his 2006 campaign, his last run for office.
Pearce also bought a car from Cactus, a Toyota sedan that he drove for five years. Pearce says he got no special deals on the car, which he described as “wrecked.”
Pearce says his intervention with DPS came after Watkins complained he was being mistreated by the agency. But those efforts were aimed at forcing DPS to follow the law in allotting its towing contracts, and were not meant to benefit Watkins or his company, Pearce says.
“I thought if they were mistreating him (Watkins) because they don’t like him, and they’re not following the law, that offends me,” Pearce said, adding he never pressured the state police to favor Cactus. “If he feels he has been wronged, Lee is the first to say ‘hey, this isn’t right.’ And like anybody, if you listen, if you agree, you are willing to take up his fight.
“Integrity is the most important thing a guy has. You don’t wage war for things you don’t believe in,” Pearce said.
Watkins would not agree to an interview. His lawyer, Kent Nicholas, says the reason is the ongoing criminal investigation into Cactus Towing by the Maricopa County Sheriff’s Office, launched three years ago.
Sheriff’s detectives served search warrants on Cactus’ office in March 2005. The investigation into allegations of overcharges under city and state towing contracts is still open.
“My client is very cautious when it comes to Sheriff Joe Arpaio,” Nicholas said. “He (Arpaio) will turn your world upside down in a heartbeat and the apology comes afterwards. What has happened to Lee Watkins has had a chilling effect, and he’s simply going to deny any wrongdoing.”
DOING THE STATE’S BUSINESS
Cactus and DPS have had a rocky history since 1996, when Cactus won the DPS towing contract for the East Valley. That contract was canceled after a competitor filed a protest. Cactus sued and won.
Cactus’ contract with DPS was renewed in 2001. But the company filed a new lawsuit that same year involving claims from the old case. Cactus and DPS reached a settlement in 2003, extending Cactus’ exclusive contract in the East Valley until June 2005.
In 2002, DPS began changing the way it allocates towing contracts on freeways and highways throughout the state. Instead of putting the contracts out for bid, and picking the lowest price, the agency set minimum standards and maximum charges for tows. Any company that qualified and agreed to the price caps could be on the DPS rotation.
DPS officials argued the rotational system ensured quicker responses when vehicles needed to be cleared from crash scenes. Since the vehicle’s owner ends up paying the bill, quality was more important to the agency than price.
DPS divides the state into 12 zones for its towing contracts. The rotational system was implemented in all except the East Valley zone. The 2003 settlement required the exclusive Cactus contract to remain in place until mid-2005.
As that agreement was about to expire, Watkins and his lawyers began an effort to derail DPS’ plans to end the exclusive Cactus contract and include the East Valley in its rotational system.
Cactus representatives notified state police of their objections to the system in January 2005. The company’s argument was that state law required competitive bidding based on price to award towing contracts, and that the rotational system was illegal.
In addition to Mangum, Watkins hired Matt Salmon as a lobbyist to kill DPS’ efforts to switch its method of allocating its towing contract in the East Valley.
Salmon, a former congressman and state legislator who at the time was chairman of the state Republican Party, says Watkins told him Pearce would be sympathetic to their cause.
“We had several meetings with Russell because he was kind of the point man,” Salmon said of his lobbying efforts. “Lee was the one that said ‘hey, go talk to Russell. I’m good friends with him and I think he’s sympathetic to the issue.’ And so naturally we did.”
Pearce is a powerful force, both in the Legislature and in East Valley politics. He is chairman of the House Appropriations Committee and is a leader of state efforts to crack down on illegal immigration. A retired sheriff’s deputy, Pearce also is preparing to run for Congress in the Mesa-based district currently represented by Rep. Jeff Flake, R-Ariz, Salmon’s successor.
Prior to being elected to the Legislature in 2000, Pearce had served as director of the Governor’s Office of Highway Safety and the state Motor Vehicle Division.
Pearce’s son, Justin, was working at the MVD when he was caught making phony identification cards for friends in September 1998.
He was indicted in 2000 on two felony charges of computer fraud, and ultimately pleaded guilty to a reduced felony of tampering with a public record.
It was his second conviction. Justin Pearce had pleaded guilty in 1998 to misconduct involving a weapon, a felony that was later designated a misdemeanor.
After the 2000 conviction, Justin Pearce went to work for Watkins as a tow truck driver. Russell Pearce says he had nothing to do with his son getting a job at Cactus, and that he received no special treatment.
“He’s a driver,” Russell Pearce said. “They are looking for bodies every day for drivers. I could have called Lee and got Justin a job there, I’m sure. I didn’t even do that.”
What Pearce did do for Cactus was sponsor a bill that would have forced DPS to go back to price-based bidding in awarding its towing contract — a system that at the time was benefiting only Cactus.
Pearce withdrew the bill after it failed to get a hearing by the House Transportation Committee in February 2005.
After his proposed legislation failed, Pearce began pressuring DPS to return to its old bidding system.
He arranged a meeting between David Felix, then interim DPS director, and Cactus representatives to allow them to hash out their differences.
When DPS refused to back down, Pearce sent the letter drafted by Cactus lobbyist Mangum to Gonzales, who by then was in charge of the agency. The letter outlined Cactus’ objections to the rotational method of allocating tows.
“The Department has previously decided to ignore what I believe to be the plain meaning of the law and continue the practice of avoiding the competitive bidding requirements,” the March 30, 2005, letter signed by Pearce states.
“It is my hope that as you begin your tenure you will conduct a wholesale review of this practice and require the Department staff to begin complying with the law.”
Three days earlier, Mangum sent a draft version of the letter for Pearce’s signature to Todd DeMasseo, general manager of Cactus, according to documents related to an investigation of the company launched in 2005 by the Maricopa County Sheriff’s Office.
Pearce says there is nothing wrong with Mangum writing his letter, adding he would not have signed and sent it if he did not agree with its contents.
“I have people down here all the time draft letters for me because they know the issue,” Pearce said. “And then I review them to make sure they are in harmony with what I believe. That’s not a bad practice.”
Mangum agrees it is typical for lobbyists to draft letters for lawmakers.
“It happens all the time,” Mangum said.
Mangum added that he does not recall who requested the letter — Pearce or someone at Cactus. Most likely it was DeMasseo, Mangum says.
Felix, who was interim DPS director when Pearce was pressuring the agency, says he did not feel intimidated by Pearce’s efforts.
DPS did not back down, and the rotational system has been a success, Felix says.
Complaints from both customers and tow companies have gone down and DPS officers spend less time dealing with concerns about overcharging under the new system, he says.
MORE LEGISLATIVE ALLIES
Pearce says after he sent his letter to DPS he quit going to bat for Cactus to avoid any perception that his efforts were improperly meant to help Watkins. He told House Speaker Jim Weiers, R-Phoenix, that he still believed DPS was breaking the law, but it would be up to someone else to take up the fight.
Weiers says he does not recall that conversation, but that he was contacted directly by Watkins sometime in 2005. Watkins explained his concerns and said his company had successfully sued DPS in the past over bidding issues, Weiers says.
After meeting with Watkins, Weiers set up a meeting with representatives of DPS to get their side. His goal, he says, was to avoid a costly lawsuit if the agency was breaking the law.
Weiers says he believes Pearce attended the meeting, but is not sure. In any case, Weiers says that after the meetings he still did not know whether Watkins or DPS was right. So he created a special ad-hoc study committee to examine the issue.
No one from Cactus spoke at that July 28, 2005, committee meeting, according to the official minutes. However, the arguments that Cactus had been making were articulated by Rep. Andy Biggs and Sen. Thayer Verschoor, both Gilbert Republicans, who were co-chairmen of the committee.
Both Biggs and Verschoor said they believed the rotational system used by DPS violated state bidding laws, according to the minutes. Phil Case, a DPS comptroller, said the system had been approved by the Arizona Attorney General’s Office, which provides legal advice to the agency.
Several towing industry lobbyists not affiliated with Cactus testified that they supported DPS’ method of allocating tows. No industry representatives spoke against it.
No legislation was introduced as a result of the committee hearings.
With his legislative and lobbying efforts going nowhere, Watkins sued DPS in September 2005. The lawsuit reiterated the claim that state law required the agency to use price-based bidding to pick its towing contractors.
Maricopa County Superior Court Judge Ruth Hilliard disagreed.
In a May 2006, ruling, Hilliard sided with DPS and ruled the rotational system used by the agency does not violate the competitive bidding requirements of the statute.
“The court finds that the procedure used ... is based on quality competition, not price competition and it is in the public’s interest to have better quality service from towing operators,” Hilliard wrote.
Pearce has not sponsored legislation since 2005 that would directly benefit Cactus. However, he has backed bills cracking down on criminal traffic violations by expanding the laws that force a person’s vehicle to be impounded for 30 days.
Those laws are a boon to towing contractors, which charge daily storage fees while the vehicle is impounded. As those storage fees add up, many vehicle owners simply do not reclaim their vehicles, and the towing companies are able to take ownership.
An analysis conducted by the Chandler purchasing office showed legislation passed in 2005 that mandated 30-day vehicle impounds for certain traffic offenses led to Cactus reaping a net increase in revenue of more than $104,000 over a three-month period from that city’s contract.
Pearce did not sponsor that legislation, but did vote in its favor.
Earlier this year, Pearce was the prime sponsor of a bill that further expanded the traffic violations that lead to mandatory 30-day impounds, adding a provision to seize the vehicles of people caught driving on a suspended license.
That led to a sharp rise in vehicles impounded for 30 days in the East Valley. Vehicle impounds in Mesa have risen from 281 in July to 486 in October, largely because of Pearce’s bill, which took effect in September. In Scottsdale, the legislation is expected to double the number of vehicles impounded for 30 days in the next year.
Pearce also wanted to mandate vehicle impoundment if anyone in a car is caught with an open container of alcohol, but that provision was stripped from his bill.
The new law was done at the request of police, Pearce says. Neither Watkins nor anyone associated with Cactus requested the bill, he says.
“Every piece of that bill was put in there as a request from law enforcement,” Pearce said. “That bill had nothing to do with Cactus.”
January 1996: Cactus Towing wins the exclusive Department of Public Safety towing contract in the East Valley. Legal disputes arise, triggering a series of lawsuits from the company.
June 2002: DPS begins switching to a rotational system of allocating tows on freeways statewide.
About May 2003: DPS and Cactus reach a settlement of claims arising out of old lawsuits that extends Cactus’ exclusive towing contract on East Valley freeways through June 2005.
January 2005: With Cactus’ exclusive DPS contract about to expire, Rep. Russell Pearce, R-Mesa, sponsors legislation that would allow the company to maintain an exclusive contract in the East Valley.
February 2005: Pearce withdraws his bill after it does not get a hearing in the House Transportation Committee.
March 27, 2005: Cactus lobbyist John Mangum sends a draft of a letter he has written for Pearce’s signature to a Cactus executive for approval. The letter to DPS objects to the agency’s intent to switch to a rotational system for allocating tows in the East Valley.
March 30, 2005: Pearce signs the letter drafted by Mangum and sends it to DPS.
June 2005: Cactus’ exclusive contract with DPS ends.
July 28, 2005: The Joint Legislative Ad Hoc Committee on Towing, created by House Speaker Jim Weiers, R-Phoenix, meets to discuss concerns about the DPS rotational system raised by Cactus.
May 9, 2006: Judge Ruth Hilliard of Maricopa County Superior Court rules the DPS contracting method is legal.